GM spending on vehicles, regions dent bottom line

DETROIT (AP) — General Motors spent billions last year rolling out new models to update its lineup of cars and trucks and restructuring to fix longstanding problems overseas.

The spending put a dent in GM's bottom line, causing the world's second-biggest automaker to fall short of Wall Street's expectations in the fourth quarter. Still, GM posted a healthy profit as strength in North America and China offset troubles in other areas.

"We clearly have a lot of work ahead to make all of our regions solidly and consistently profitable," new CEO Mary Barra told industry analysts Thursday.

GM's net profit for the quarter rose 2 percent from a year ago to $913 million, or 57 cents per share. Revenue increased 3 percent to $40.5 billion. Excluding one-time items such as a $700 million charge to pull the Chevrolet brand out of Europe, GM made 67 cents per share. But analysts polled by FactSet expected 88 cents on revenue of $40.8 billion.

New Chief Financial Officer Chuck Stevens said Wall Street analysts "didn't comprehend that restructuring," which involved employee severance expenses as GM moves to close two factories in Europe.

Missing estimates pushed GM shares down in the morning, but they recovered by the afternoon and were up 44 cents to $35.86.

Barra, the first woman to lead a major automaker, said GM has to build the reputation of its brands, as well as further cut material, logistics and fixed costs. "It's going to be a multi-year journey," said Barra, who on Thursday was named the most powerful woman in business by Fortune magazine.

GM rolled out 37 new or freshened models worldwide last year and plans to introduce 30 more this year including the Chevrolet Canyon and GMC Colorado midsize pickup trucks, new heavy-duty full-size pickups and redesigned big SUVs like the Cadillac Escalade and Chevy Tahoe.

For the full year, GM's earnings fell 22 percent to $3.8 billion or $2.38 per share. Without one-time items, including $800 million in impairment charges, it earned $3.18 per share. But the company said that if taxes and restructuring costs are excluded, it made $8.6 billion for the year, up $700 million from last year.

In North America, GM made $1.9 billion in the quarter before taxes and a record $7.5 billion pretax for the full year. Stevens said the company's four brands gained market share in retail sales to individual customers, and its average sales price per vehicle rose. The North American profits paid off for 48,500 GM hourly workers who will get $7,500 in profit-sharing checks.

Pickups were a big part of the profit as GM shunned discounts in favor of making more money per vehicle. Stevens said GM will stick with its approach of selling cars and trucks on value rather than price.

"What we want is profitable growth," he said.

GM also was able to cut in half the gap between its U.S. pension obligations and the amount it has set aside. The gap now is $7.3 billion, lowered in part due to better investment returns.

In Europe, a money losing trouble spot for more than a dozen years, GM saw improvement. It lost $800 million for the full year, but that was less than half of the $1.9 billion it lost in 2012.

But outside North America, Europe and China, GM's results were weaker than a year ago.

GM earned $1.2 billion in its international operations, which include Asia, for the full year, less than half the $2.5 billion it earned a year ago. And in the fourth quarter, without $400 million from China, the international unit would have lost $200 million.

GM's operating profits also fell in South America, where it earned $300 million for the full year, down from $500 million in 2012.

Citi Investment Research Analyst Itay Michaeli told investors in a note that he doesn't think the quarter changes GM's story. "Weakness is isolated to regions where GM is aggressively restructuring throughout 2014," wrote Michaeli, who has a $48 one-year price target on the stock.

But Stifel analyst James Albertine wrote that GM's European restructuring may take longer and be more expensive and risky than management is saying. GM still expects to break even before taxes in Europe by the middle of this decade.

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